In a debate organised by Abacus titled Fees versus Commissions, Justin Hooper, managing director of Sentinel Wealth Management, Paul Resnik, co-founder and director of FinaMetrica, Andrew Inwood, principal of brandmanagement, Tony Clark, partner at Multiforte Financial Services and Peter Bobbin, partner at The Argyle Partnership adopted Edward de Bono’s “six thinking hats” approach to discuss the provision of and payment for financial advice.
Christopher Golis, author of The Humm Handbook, chaired the discussion on Wednesday, 5 November, which set out the facts (white hat); discussed the emotions and feelings around the issue (red hat); laid out the risks and potential problems (black hat); gave a positive assessment (yellow hat); offered creative solutions (green hat); and defined the subject and focus (blue hat).
Panellists agreed that disclosure-based regulation had failed, and that in order to rebuild trust in the planning industry there was a need to separate professional financial advice from product.
Hooper suggested the financial planning industry, including accountants and solicitors, should be divided into three categories; product experts, technical and strategy experts and principal wealth advisers.
“Principal wealth advisers need to be sufficiently trained in how to deal with clients,” he says.
“We have undergone a transition to a more technical industry. Advisers are not sufficiently trained in client engagement. If CFP is the technical qualification, what is the qualification that deals with the emotive issues and helping advisers to understand what’s important to [clients]?”
The benefits of such delineation, according to Clark, would be that people would understand the different buckets of service and know where to go to find a planner suited to their individual needs.
But the only way forward for the industry, he believes, is through government intervention.
“I believe the only way is for the government to step in and say ‘you are either a product provider or an adviser, which one is it?’,” he says.
While noting that further regulation is not the answer, Bobbin warned the industry faces “an avalanche of regulation” following the global economic crisis.
According to Resnik, part of the 1 per cent plus charged by the advice industry should go back into adult financial literacy, to help consumers understand the value of advice, and saving for retirement.
“On the face of it, the client knows what they pay; they do not know who they pay it to,” he says.
The consequence of a lack of understanding and confusion around fees and commissions, he argues, is that people choose not to go to a financial adviser.
